When teenagers are the topic of discussion, finance is probably not the first thing that comes to mind. However, getting teens into the right financial track can really make a difference in their financial future. While the scale of personal finances is rather small when it comes to teens, good financial habits are universal, and hence, applicable to the young lot too.
With 2020 confining us within our four walls, it only makes sense to make the most of it and work on ourselves. On that note, here are some golden personal finance tips for teens. Psst; these could help you even if you aren’t a teenager!
Tracking Expenses On A Weekly Basis
The simplest and most basic practice that teens can adopt is tracking their expenses. Why we suggest weekly is because it helps to keep a closer tab at one’s finances. Once you’re confident about your financial management skills, you can always switch to a monthly tracking habit. Also, teens are quite impulsive by nature, so there’s a strong chance that each week may have its own range of expenses. It, therefore, makes sense to deal with each week as it’s done. At a time like this, online shopping can seem a very tempting option, so keeping a tab on each purchase will surely help.
Getting Into A ‘Savings’ Habit
Most teens may not have the luxury to go big on savings, but that’s not the point here. Whatever be your monthly pocket money, you can make it a habit to set aside a small amount (whatever’s comfortable) every month. This way, you’ll be able to lay the foundation for future savings and also have a cushion to fall back on when the money’s tight. Most importantly, you’ll habituate yourself to save money, and that’s a very essential life skill to possess. With many sources of entertainment still closed for public access, now may be the best time to maximise your savings.
Identifying Needs & Wants
This particular aspect of personal finances is hard enough for adults themselves, so one can imagine how difficult it must be for an adolescent mind to identify and differentiate needs from the many wants, but it isn’t impossible. Once in a while, take a moment to analyse your purchasing patterns.
The easy way to differentiate the needs from the wants is to make a list. Open up a spreadsheet, divide it into two columns. On the left column, you can list things that you need in the near future; this can be necessities such as books, home appliances or basic clothes. Now on the right side, you can write your wishlist, i.e, your wants. Depending on what tickles your fancy, this can be anything from the movie you’ve been waiting to watch at the cinema hall to the latest mobile phone or video game console you’ve been eyeing.
Taking Baby Steps Into The Credit World
While it’s true that youth and credit may not be a match made in heaven, building familiarity with the world of credit can actually help teenagers understand and develop a sense of maturity when it comes to handling credit. For instance, let’s say your savings account is tied to one of your parents’ bank accounts. In such cases, chances are that the bank may offer you a Credit Card. If this situation presents itself, you can take a collective decision with your parents, and if they also feel it will help you understand credit, you should go ahead and get that card.
Not only will it help you establish your credit history at an early stage, which is great for your Credit Score in the long run, it will also teach you how to handle the power of a Credit Card. Sure, you may make a mistake or two, but since you’ll be dealing with smaller amounts, you’ll be able to recover from it easily and be doubly safe in the future, having learnt some valuable lessons at the outset.
BankBazaar.com, India’s leading online marketplace for loans and credit cards.